The Professional Oversight Board, an operating body of the Financial Reporting Council (FRC), has today published recommendations for the UK Actuarial Profession (the Faculty of Actuaries and the Institute of Actuaries) to consider stricter independence requirements for pension scheme actuaries, and professional quality assurance requirements for consulting actuaries.

The Board has published its recommendations as part of a report on The Actuarial Profession’s progress and priorities in regulating its members, which noted the steps the Profession has taken to improve its regulatory capability, including the appointment of Sir Philip Mawer as chairman of its Professional Regulation Executive Committee. The Board called for early finalisation of the Actuaries’ Code, on which the Profession is currently consulting, and development of a standard on conflicts in pensions; as well as further clarification of the competence requirements and skill-sets expected of practising actuaries.

The Board’s latest recommendations follow a consultation on 'Monitoring and scrutiny of actuarial work', published in May 2008, and a parallel FRC consultation on 'Promoting actuarial quality', which resulted in the development of the FRC’s 'Actuarial Quality Framework'. The Profession has agreed to consider the recommendations carefully and respond with initial regulatory proposals and a detailed plan later this year.

Dame Barbara Mills, Oversight Board Chair, commented:

”As the Profession readily acknowledges, its progress has been slow in some areas, but we welcome the commitment of Sir Philip Mawer and his colleagues to develop a more outcome-based approach to regulating its members, in the public interest, and monitoring the quality of its regulatory processes for achieving those outcomes.

“Our recommendations address the increased pressures on actuaries, in today’s tougher economic conditions, to make or accept inappropriately aggressive judgments and take or support inappropriate decisions, and the need for users to be able to rely on them to have proper quality controls over their work.”
 

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The Professional Oversight Board provides independent oversight of the regulation of accountants and actuaries by their respective professional bodies. It provides statutory oversight of the regulation of the auditing profession by the recognised supervisory and qualifying bodies and, through the Audit Inspection Unit, monitors the quality of the auditing function in relation to economically significant entities.
3. Pension scheme actuaries are usually appointed to advise the trustees of defined benefit pension schemes on matters specified in pensions legislation and scheme documentation. The Oversight Board has recommended that, as part of the development of a specific standard on conflicts in pensions and a replacement for its compliance review standard in pensions (GN48), the Actuarial Profession should consider restrictions on scheme actuaries from providing advice to separate parties, such as trustees and sponsors on the same or closely related issue, unless there is an independent review of their work; and the scope and depth of its compliance review requirements in areas where the Board for Actuarial Standards plans to issue specific technical actuarial standards.
4. Consulting actuaries are actuaries who provide professional actuarial services to an external client, which relies on them to have independent professional quality controls over their work. The Oversight Board has recommended that, in conjunction with the Profession’s current review of its practising certificate requirements, it should consider further ways of influencing the working environment for actuaries to support and confirm compliance with their professional responsibilities. It would be for the Profession to consider specific safeguards over the quality of consulting actuaries’ work; based on an Oversight Board survey of actuarial firms in 2007, and the professional requirements for practising accountants and lawyers, these might involve confirmation of the following:
   • A senior actuary at the firm with responsibility for providing professional leadership on quality issues;
   • Controls on competence (including CPD) and quality control for individual actuaries within the firm;
   • Arrangements for conflict management and protection of confidential information;
   • Arrangements for dealing with complaints, and compensation for professional shortcomings; and
   • Arrangements for co-operating with regulators and whistle-blowing.
5. Proposals for consulting actuaries would not affect actuaries who provide in-house services solely for their employer, or actuaries who do not work in a professional actuarial capacity.
6. All media enquiries should be addressed to Paul George, +44 (0)20 7492 2340 or Paul Kennedy, +44 (0)20 7492 2347 or email at: p.kennedy@frc-pob.org.uk